2024 (4) TMI 1038 - AT - Service Tax

Non-payment of service tax - Valuation - Reimbursements of expenses - Pure Agent - 'Freight Reimbursed' and 'Miscellaneous Expense Reimbursed' - Whether the services provided under two separate agreements (Handling Agent Agreement and Transport Agreement) should be classified independently or merged as a single clearing and forwarding agent service for tax purposes. - Reverse Charge Mechanism - extended period of limitation - HELD THAT - The dispute in this case is for the inclusion of freight amount in the value of C F service for which a separate agreement has been entered into with the principal, which we do not consider legally tenable. In the case of Gunesh India Pvt. Ltd 2022 (5) TMI 1042 - CESTAT NEW DELHI in similar type of arrangement with M/s Ultra Tech Cement Ltd Delhi Bench has held under this agreement under the scope of work, the appellant have correctly treated the work as GTA service and service tax have been rightly discharged by the recipient Ultratech Cement Ltd under Reverse Charge Mechanism. Thus, the confirmation of demand on the appellant is bad and accordingly set aside. The demand in terms of the above decision which is squarely on the same set of facts have been set aside both on the merits and also limitation. In case of Srinivasa Transports 2014 (6) TMI 205 - CESTAT BANGALORE Bangalore bench has held the appellant has provided labour for undertaking miscellaneous jobs and payment has been made to the appellant based on number of man-days involved. This service also would not come under the category of cargo handling service. Therefore, clubbing all the activities undertaken by the appellant under Cargo Handling Service and levying Service Tax under the said category cannot be sustained in law. The adjudicating authority has to examine the individual activities carried out by the appellant and then classify the same, considering the definitions provided in the law, which has not been done in the present case. Therefore, the matter has to go back to the adjudicating authority for fresh consideration. The impugned order cannot be sustained and the same is set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether the Appellant is liable to pay Service Tax on amounts received as "Freight Reimbursed" and "Miscellaneous Expense Reimbursed" from M/s UltraTech Cement Limited (UTCL).
2. Whether the extended period of limitation is invokable in the present case.

Issue 1: Liability to Pay Service Tax on "Freight Reimbursed" and "Miscellaneous Expense Reimbursed"

The Appellant provided 'Clearing & Forwarding Agent Services' to M/s Ultra Tech Cement Limited (UTCL) and entered into two separate agreements: a 'Handling Agent Agreement' and a 'Transport Agreement'. The department issued a show cause notice alleging non-discharge of Service Tax on incomes under 'Freight Reimbursed' and 'Miscellaneous Expenses Reimbursed' during the financial years 2012-13 to 2016-17. The demand for Service Tax amounting to Rs. 2,72,92,383/- was confirmed along with interest and penalty u/s 78 of the Finance Act, 1994.

The Tribunal found that the C & F Agent and Transportation Services are two independent services rendered under separate contracts. The Appellant contended that they acted as a Pure Agent u/s Rule 5(2) of Service Tax (Determination of Value) Rules, 2006, and that UTCL paid service tax under reverse charge mechanism for transportation services. The Tribunal held that the two agreements were not interlinked and that the transport services provided were segregated into actual transport costs (on which UTCL paid service tax under RCM) and service charges (on which the Appellant paid service tax).

Relying on precedents, the Tribunal concluded that the demand for including freight amount in the value of C & F service was not legally tenable. The Tribunal referenced the case of Gunesh India Pvt. Ltd and other similar cases where it was held that separate agreements for different services should not be clubbed together for Service Tax purposes. The Tribunal set aside the impugned order, stating that the activities under the transport agreement were not part and parcel of clearing and forwarding agent service but were independent services.

Issue 2: Extended Period of Limitation

The Tribunal also addressed the issue of the extended period of limitation. The Appellant argued that the extended period was not invokable as UTCL was discharging service tax under reverse charge and the issue involved interpretation of law. The Tribunal found that there was no case of suppression or mis-statement on the part of the Appellant and that the extended period of limitation was wrongly invoked by the revenue.

In conclusion, the Tribunal allowed the appeal filed by the Appellant with consequential relief, setting aside the demand for Service Tax on "Freight Reimbursed" and "Miscellaneous Expense Reimbursed".

(Pronounced in open court on 24.04.2024)